Archive for the ‘General’ Category

Coalition for a Prosperous America’s California Chapter Celebrates the Outlook for the Future

Tuesday, December 17th, 2013

The California Chapter of the Coalition for a Prosperous America (CPA) held their annual dinner in San Diego on January 11th at the Del Mar Hilton to look back on this year’s work and ahead to the coming year, as well as honor those who have helped make that work successful. Nearly 80 attendees joined me in showing our appreciation to Senator Mark Wyland for being the co-host of the well-attended “Manufacturing in the Golden State–Making California Thrive” economic summit last February. Unfortunately, co-host Assemblymember Toni Atkins was unable to be present. Assemblyman Tim Donnelly and County Supervisor Dave Roberts attended along with staff representing Congresswoman Susan Davis, Congressman Darrell Issa, Assemblyman Brian Jones, and Assemblyman Rocky Chavez.

I shared how I became involved with CPA, which is a non-profit, non-partisan membership organization established in 2007 as a coalition of manufacturing, farming, ranching, and labor to fix the U.S. trade deficit and the economy. CPA uniquely joins these distinct groups and focuses on both grass roots and Washington, D. C. lobbying efforts. CPA educates business, organization and political leaders about the economic harm caused by the trade deficit, methods to correct the deficit, and the need to develop and implement a national strategy to produce more in the U.S. so jobs and the taxes they create stay in the U. S.

When I was researching and writing the chapter “What is being done now to save American manufacturing?” for the first edition of my book in 2008, I found many trade and professional organizations that were focused on a particular issue important to their industry or profession, but there didn’t seem to be any collaboration between the organizations to support or oppose issues that affected American manufacturers. The two most powerful organizations, the National Association of Manufacturers and the U. S. Chamber of Congress seemed to be controlled by the large multinational corporations whose position on various issues were at odds with those of smaller American-only manufacturing corporations.

After my book was published in 2009, I met Ian Fletcher, author of Free Trade Doesn’t Work:  What should replace it and why, and he introduced me to CPA when he became their Sr. Economist in early 2011. I realized this was just the kind of organization I had been looking for and started participating in their member-at-large monthly conference calls to share what we were each doing to work on issues adversely affecting American manufacturing.

I volunteered to help CPA put on a Smart Trade Conference on March 28, 2012, and one of the people that attended was Donna Cleary, Field Rep for State Senator Mark Wyland. She asked CPA to facilitate putting on a manufacturing summit in the fall. Because of the national election, we postponed the summit to February 2013, which gave us more time to solicit partners and sponsors. Our partner list became the “who’s who” of organizations in San Diego, and the summit was very successful. In addition to being a bi-partisan event, what made it different was that we broke into small groups after the main presentations and conducted “pair wise” voting on issues to come up with the top two issues: California regulations and the need for a national manufacturing strategy.

We formed a Manufacturing Task Force and produced a report that we disseminated to all of the attendees and subsequently presented to our Congressional delegation. We also presented CPA position papers on the trade deficit, currency manipulation, County of Origin labeling, Border Adjustable Taxes, and “Fast Track” Authority for the proposed Trans-Pacific Partnership Agreement (a trade and global governance agreement being negotiated by the U.S. with eleven Pacific Rim nations).

We sponsored a viewing of the film “Death by China” in September, which clearly shows that we are in a trade war with China that we are losing, and American companies aren’t competing against Chinese companies, but the Chinese government itself.

The next speaker was Mike Dolan, Legislative Representative for the Teamsters, who said, “If CPA didn’t exist, we’d have to invent it.” His basic point was that, based on his long experience working on the Hill and in the field for Fair Trade (fighting expansion of the flawed and failed NAFTA/WTO model), we can win the current battles of the Trans-Pacific Partnership and Fast Track if and only if we build and maintain a strong bipartisan mobilization. He called the TPP “NAFTA on steroids.” He doesn’t see a path to victory next year on sensible trade policy without the Coalition for a Prosperous America and the constituencies it represents — small business, particularly in industries that are sensitive to trade fluctuations, family farmers and ranchers, working families and “trade patriot” activists including the Tea Party cadres.

Bill Bullard, CEO of R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) was the next speaker. He said they joined the Coalition because their industry was being unfavorably impacted by current U. S. trade policies and unfair trade practices by our trading partners. He said, “The number of privately owned cattle and sheep ranches has been going down dramatically since 1994 when NAFTA went into effect and accelerated after China became part of the World Trade Organization (WTO) in 2000. The size of the beef and sheep herd has been decreasing every year, while imports of beef, lamb, and mutton have been increasing.” Shockingly, he revealed that fast food restaurants are not required to disclose the origins of their beef and even when restaurants say the beef is “U.S. Inspected,” it is as likely as not to be imported. Their industry especially needs the government to provide consumer package labeling to show where meat and livestock was born, raised and slaughtered and to reverse the current policy of lowering U.S. health and safety standards just to facilitate more imported meat.

CPA President Michael Stumo presentation was “A Prosperity Strategy for America,” in which he stated:  “We are convincing Congress that we need “net exports,” not merely more exports, to be a successful trading and producing nation. In 2011, our trade deficit shaved an astounding 4% from overall U. S. GDP. We should have a national goal to grow manufacturing back up to 20% of GDP rather than 11%.

Supply chains are the lifeblood of our economy, and all tiers of suppliers to the OEMs are important. They produce the jobs, the job multipliers, the wealth, the innovation, and the intellectual property of a successful developed economy. Those in Washington who are pushing “global supply chains” are really pushing offshoring of our supply chain. We need a strategy of acquiring, keeping, and growing “domestic supply chains” for a strong America.

We need to stop offshoring our manufacturing jobs and the taxes they create to safeguard our economic strength, our democracy and our constitutional republic. The globalization agreements like the Trans-Pacific Partnership are only 15% about tariffs and quotas and 85% about non-trade topics. These other topics include financial regulation, taxes, food and product safety, product labeling, government procurement of domestic supplies, and other matters. These globalization deals transfer the authority of Congress and states over these domestic policy issues to unelected international tribunals of foreign trade lawyers.

The old way of manufacturing and labor working separately for their interests no longer works. These issues are a macro problem for our country and affect all Americans. That’s why manufacturers, farmers, ranchers and workers must work together.

It is working. A large part of Congress signed a letter opposing Fast Track trade authority because of sovereignty and economic issues. Leadership on important committees is talking about net exports rather gross exports. A majority of the House and Senate signed a letter calling for effective protections against foreign currency manipulation in future international agreements. We need to win. Vince Lombardi said ‘winning isn’t everything… it’s the only thing.’ We can win these issues by expanding our membership of individuals, companies, and organizations and expanding from eight state chapters to at least 25 chapters.”

In the wrap-up presentation, Dave Frengel, Director of Government Relations, Penn United Technologies, a precision tool making company, said, “We have 600 employees today, but if our government had been standing up for us against China’s unfair trade practices, we would have 1200 employees, most in family-sustaining jobs with good benefits. Unfair trade affects the entire U.S. supply-chain, not just our company. Our government has been turning its back on production of food and manufactured goods. Our precision tooling and manufacturing industry, which is critical to America’s industrial economy, is a third of what it was before this era of bad U.S. trade policy began. The resulting loss of jobs is huge.”

He continued, “When I was asked by my boss to “fix trade” 11 years ago, we tried working within the National Association of Manufacturers, but our voice and that of other American-only manufactures was ignored. We realized that we needed to join not only with manufacturers and concerned citizens, but with farmers, ranchers and workers to win. We realized that the mission would not be accomplished through existing organizations – we needed a new organization to get the job done. That is why we were a founding member of CPA.

For nearly seven years now, CPA has been holding events all over the nation to raise awareness and mobilize local leaders around trade reform issues. CPA members and staff made over 200 legislative visits this past year. The credibility and influence of CPA is growing and our trade reform message is becoming more convincing as we continue to have crucial conversations with a growing circle of trade policy leaders in Washington, D. C.

We are opening new doors with trade negotiators inside the Obama Administration, the House Ways and Means Committee, and the Senate Finance Committee. Our efforts helped gain massive Congressional opposition to Fast Track trade authority and in support of our constitution. Our efforts helped gain a majority of Senate and House support for effective currency manipulation provisions in all future trade deals.

The Chinese will negotiate forever without changing their predatory trade strategies. We need protection from those who cheat us, which requires strong enforcement of international trade rules by our government. We can compete against foreign companies, but not against foreign governments that rig markets to cheat us out of our share of markets. The Coalition for a Prosperous America works for trade reform that delivers prosperity and security to America, its citizens, factories, farms, and working people. The solutions that CPA focuses on will benefit those who make and grow things here.”

In conclusion, he stated, “We are gaining more GOP support, more Democrat support, more Tea Party support, more citizen support, and more producer support. This year, we’re starting to win – because of the growth in size and influence of the Coalition for a Prosperous America. We need to get stronger. We need you to consider joining CPA as an individual or a company member or to make a tax deductible donation to the CPA Education Fund.”

Bad U. S. trade policy is a major cause of California’s economic crisis. Offshoring has cost California hundreds of thousands of its manufacturing jobs. Family members lost good jobs; communities declined; property values plummeted. We Californians know that we need a smarter U.S. trade strategy.

As a fledgling chapter, we are already influencing the trade policy positions of San Diego’s Congressional delegation, but need to grow to influence the other 48 Representatives and our two Senators to support better trade deals that will grow our economy. This is not a Republican issue nor a Democratic issue, but an American issue, and they must vote right to properly represent California. We need to get stronger and grow to accomplish our goals. We need your involvement and financial support to make a difference. Please contact me at mich...@savingusmanufacturing.com to participate in the California Chapter.

Country of Origin Labeling is Critical to Buying American and Must be Improved

Tuesday, December 3rd, 2013

On January 15, 2013, Walmart and Sam’s Club announced that they will buy an additional $50 billion in U.S. products over the next 10 years. “…by increasing what it already buys here – in categories like sporting goods, apparel basics, storage products, games, and paper products, and by helping to onshore U.S. production in high potential areas like textiles, furniture and higher-end appliances.”

The news release stated, “A popular misconception about Walmart is where the majority of the products on its shelves are sourced. According to data from its suppliers, items that are made here, sourced here, or grown here account for about two-thirds of what the company spends to buy products at Walmart U.S.”

Since 11 months has passed since Walmart’s announcement, I wanted to see if the company was living up the claims of their press release. So I visited two Walmart stores in San Diego to see if I could find products with “Made in USA” labels. I spent a couple of hours going through various departments. In the clothing departments for men, women, boys, girls, and babies, I only found one “Made in USA” label on a team logo shirt made by Intex in the sports team department. The majority of clothing in all departments had “Made in China” labels, but there were also labels for clothing made in Bangladesh, Cambodia, El Salvador, Honduras, Jordan, Nicaragua, Pakistan, and Vietnam.

When I browsed the small appliance and furniture departments, I found only “Made in China” products. I was especially disturbed to see only “Made in China” labels for everything in the baby department: car seats, cribs, infant seats, playpens, strollers, swings, etc.

Since Walmart pledged to buy more “Made in USA” textiles, I made a point to check the labels of all the products in the Bedding department. I found sheets made in China, India, and Pakistan, but all of the comforters, blankets, bedding sets, pillows, towels, bath rugs, and throw pillows were made in China. It was interesting to find two brands of foam mattress pads (Intex and Mainstay) made in America that were cheaper than the brands made in China.

I browsed the sporting goods department carefully and was pleased to find Exxel sleeping bags made in America. I wrote about this company in the second edition of my book as an example of a company that “reshored” manufacturing; that is, returned manufacturing to America from offshore. “In 2007, 60 percent of Exxel’s sleeping bags were made in Shanghai, while Haleyville [Alabama] produced the rest. By 2009, only a third came from China, and by 2010, Haleyville accounted for 90 percent. ‘Labor is China’s advantage and our weakest link,’ Kazazian said. ‘But they can’t compete with me on my just-in-time production cycle.’”

I did find one model of Coleman coolers (a blow-molded plastic model) “Made in USA,” but all other models were made in China. All of the weights, exercise balls, golf clubs, tents, air mattresses, and sports balls were made in China.

Regarding paper goods, you can find “Made in USA” cards in the gift card section, but they are outnumbered by a 3:1 ratio by “Made in China” cards.

I didn’t have time to check labels in the grocery department, but am sure that I would have found the same labeling information I am accustomed to seeing as I noticed that they carry the same brands that I regularly buy at my local grocery store.

The problem with food labeling is that Country of Origin (COOL) Labeling rules defined by the U. S. Department of Agriculture (USDA) leave some loopholes that mean consumers are not getting all the information they need to make informed buying decisions.

For example, seafood has been covered since 2005, and raw seafood requires a label, but if it is cooked or smoked, no label is required. Since 2009, beef, poultry, lamb, goat, some nuts (peanuts, pecans and macadamias), fresh and some frozen fruits and vegetables, and ginseng have to be labeled with their country of origin. However, this requirement applies to retailers (grocery stores), but is not required at restaurants or specialty markets (like fish markets, butcher shops or roadside stands).

The USDA rules for COOL exempt “processed” versions of the foods, and unfortunately, USDA defines the word “processed” in the broadest way they could, so that the maximum amount of food is exempted from labeling. The rules now exempt things that are:

  • cooked, roasted, smoked or cured
  • combined with one other ingredient

This means that all of the frozen meals that you warm up in your microwave have no Country of Origin labels for the ingredients of the meal. The packages just provide “Distributed by” information. The rule that adding one ingredient exempts products from labeling means that lots of frozen vegetables (think peas and carrots) and salad mixes don’t have to be labeled.

Most nuts sold in grocery stores are roasted, so they aren’t labeled. Meat that is cooked, roasted, smoked or cured doesn’t require COOL labeling, so a lot of product in the pork section of the meat case is exempt because it is smoked or cured.

An example of labels that are misleading is the “Product of Canada” labeling on Gorton’s gilled Tilapia packages. Since tilapia is a warm water fish, my husband recently inquired as to where their tilapia is raised. The email reply from Gorton’s Customer Service said:  “All of our tilapia is produced (finished and packaged) in facilities located in either the U.S. or in Canada. All of our coatings, glazes, breading, and flavors are produced in the US and Canada. Our tilapia is aquacultured (farm-raised) fish raised in freshwater ponds and lakes, primarily in China and Indonesia. All of our tilapia is from Best Aquaculture Practices (BAP) or Aquaculture Stewardship Council (ASC) certified facilities. Gorton’s goes beyond FDA standards to ensure that our tilapia is safe and of the highest quality. We work with only a few, carefully selected tilapia growers who share our dedication to producing only high quality, safe products. In addition, we inspect every lot of tilapia in our own raw material inspection and safety testing facility. Regardless of where our seafood is caught and processed, Gorton’s uses strict, rigorous quality control processes to ensure that we provide you with the safest, most wholesome and delicious seafood products on the market.” The good news about Gorton’s fish products is that the labeling on their grilled salmon states “Made with 100% wild-caught salmon.”

Another example of a misleading labeling is the new label on some of the Starkist tuna products as part of their recently launched its “Made in America” campaign to celebrate its 50th anniversary in American Samoa… The new American flagged themed labels are on 12-ounce cans of “chunk light” tuna processed in American Samoa – an American territory, so technically it’s made in America.

 

However, according to a U.S. General Accounting Office report, “…more than three-quarters of cannery employees were foreign workers from neighboring Samoa, an independent country.” The workers are far paid less than the U.S. minimum because Congress passed legislation that delayed for Samoa the minimum wage increases that went into effect for the rest of the country. “The minimum wage in American Samoa’s canning industry is set at $4.76 per hour and will not increase until at least 2015.”

In addition, it’s nearly impossible to verify the issue of where the fish is caught and if the fish were caught by U.S. flagged vessels. An article in Undercurrent News states, “While it may seem important to know whether the majority of the fish is caught — in US waters or outside of them — it is not, as far as the US government is concerned. ‘ As long as a US-flagged vessel catches the fish, the US government considers it to be US fish, ´ said Peter Flournoy, a lawyer for commercial marine harvesters. He added, ‘This includes fish caught outside of US waters.’”

Besides ensuring food safety, one of the goals for knowing the Country of Origin for products is to promote the creation of jobs for Americans. The current loopholes for labeling of products such as Starkist’s chunk light tuna are certainly not contributing to achieving this goal.

I’m sure few Americans know that Starkist is now a U. S. subsidiary of the Korea-based tuna giant Dongwon Industries, which means that when American consumers buy Starkist tuna, they are buying a product of a Korean company selling fish caught in international waters, packaged in American Samoa by foreign workers making less than the minimum wage.

We need to make Country of Origin (COOL) Labeling mandatory for all processed food, including frozen meals, vegetables, as well as canned food such as tuna. We could start by requiring that all ingredients representing 25 percent or more of the product be identified by country of origin on the label, including where fish are being farm raised.

 

Why it is Important to Know Where Products are Manufactured

Tuesday, September 3rd, 2013

At a time when more consumers are paying attention to where products are made and expressing greater interest in buying “Made in USA” products even if they cost more, there are changes proposed that could impact consumers being able to make decisions on the products they buy.

The first reason we need to know where products are manufactured is to have a clear picture of whether the nearly six million manufacturing jobs we have lost since 2000 have been mainly the result of technologic advances and higher productivity in the U. S. or whether outsourcing to foreign countries like China has been the main cause.

For decades, there have been companies referred to as manufacturers that I called “virtual manufacturers.” in my book. These companies have no manufacturing capability in-house. Sometimes they don’t even have the personnel to design the product. The founders of the company may have a concept of the new product they wish to develop and market, but they don’t have the technical expertise to do the design and development themselves. They hire outside consultants to design and develop the product or subcontract the design, development, and prototyping to a company specializing in these services. At the extreme end, they subcontract out everything from start to finish, including engineering design, procurement of parts and materials, assembly, test, inspection, and shipping to the end customer. They may handle marketing and customer service themselves, but sometimes they even subcontract these functions to marketing and customer service firms. There was no real impact on U. S. manufacturing data as long as these U. S. companies outsourced their manufacturing to other domestic manufacturers.

However, in the past 20 years, these virtual manufacturers have increasingly outsourced most or all of their manufacturing offshore. This resulted in U. S. federal agencies involved in economic data labeling them as “factoryless goods producers” and classifying them as “wholesale traders,” if they didn’t do any domestic manufacturing themselves. Apple, Nike, and Cisco are some of the more well known “factoryless goods producers” because of having their manufacturing outsourced offshore.

Now, U.S. federal agencies involved in economic data want to change the way they classify companies that have outsourced their U.S. production to foreign manufacturing companies. They are proposing to reclassify these “wholesale traders” as “domestic manufacturers.” This means that their sales would be counted as U.S. production and their products that are made offshore and imported into the U. S. for sale would no longer be counted as imports.

As reported in the August 20th issue of Manufacturing & Technology News, the purpose of this change is supposedly “to determine how much products are been offshored and to pinpoint the number of American companies that are linked to manufacturing, even though they don’t make the products they design and sell.”

For the past decade, “U.S. statistical agencies found that the North American Industry Classification System (NAICS) did not provide a clear definition of companies that outsourced their production overseas, but that still owned the design and controlled the production and sale of goods from that foreign production.” A Manufacturing Transformation Outsourcing Subcommittee was formed in 2008 by the Economic Classification Policy Committee “to define outsourcing and identify “characteristics of establishments that outsource manufacturing transformation activities.” The committee was made up of representatives from the Bureau of Economic Analysis, the Bureau of Labor Statistics, the Census Bureau and the White House Office of Management and Budget.

“The committee decided that all factoryless goods producers should be classified in manufacturing, the specific industry classification based on the transformation production process used by the contractor”  and recommended that the classification changes be implemented in the 2017 North America Industry Classification System.

There is disagreement on whether this change would be beneficial as it would impact a dozen major government statistical series, such as industrial production, producer price indexes, and industrial productivity.

In my opinion this change would result in data that is misleading and wouldn’t be giving a true picture of American manufacturing. We would not be able to know how much is actually being produced in the United States if we count imports from offshore as if they are domestic production. This change could radically increase U.S. production statistics and reduce our import statistics making our trade balance artificially look better.

A better way to find the answer to this question has been provided by San Diego entrepreneur and businessman, Alan Uke in his book, Buying America Back:  A Real-Deal Blueprint for Restoring American Prosperity. Mr. Uke writes, “Our future as a nation and as individuals is being threatened. Since our spending habits as consumers have contributed to this situation, we can change our spending habits to reverse it… in order for a change to happen, consumers must demand to be more honestly and completely informed about what they are buying and where their money goes. To this end, we are starting a consumer movement to bring this to the attention of Congress…The goal of this movement and of this book are to encourage people to change their buying habits toward purchasing things that help the U. S. economy and job situation.”

He points out that the current information provided on country of origin labels is “misleading, incomplete, inaccessible, or all of these…In order to support our economy and American industries, we must have easily accessible, clearly communicated, and truthful information about a product’s entire origins.”

Mr. Uke recommends that consumers be provided the country of origin information they need at the point of sale whether at a store or online and presents a proposal for the U. S. government to require detailed country-of-origin labels for all manufactured products similar to the nutritional information labels now required on packaged food products. He feels that it is important for consumers to “see the last place where the product was manufactured” and “to discern what portion of its components came from other places” by use of what he calls a “Transparent Label.” It would include the cost by country of origin by both percentage and trade ratio, as well as the location of the company’s headquarters. The percentage is the total cost of the product that is produced or transformed in a particular country. The trade ratio describes the amount of exports vs. imports for a country in relation to the United States. This label would enable consumers to make better decisions when they buy manufactured goods.

The second reason we need to know where products are manufactured is to protect ourselves from unsafe, defective, toxic, and counterfeit products. The U. S. Consumer Protection Safety Commission’s website provides a monthly list of products that have been recalled, and month after month, more than 90% are made in China.

A label similar to Mr. Uke’s recommendation would help companies comply with the new product safety standard (ISO 10377) recently released by the International Standards Organization (ISO):  The “Consumer Product Safety — Guidelines for Suppliers” standard (ISO 10377). The summary written by Dr. Elizabeth Nielsen, Chair of ISO/PC 243, Consumer product safety and a Canadian government Scientist, Regulator and Policy Analyst, states, “Regardless of company structure and organization, ISO 10377 will affect all suppliers irrespective of their role in the supply chain and all types of products whatever the origin.”

“Products should be traceable and carry a unique identifier that is labelled, marked or tagged at the source. This also goes for raw materials, components and subassemblies. Suppliers should insist on properly identified products from vendors and be able to trace products back to their direct source and identify the next direct recipient of the product in the supply chain.”

This standard has a different purpose for labeling than Mr. Uke’s label:  to protect consumers from unsafe, defective, toxic, and counterfeit products. “Products are safer when they carry documentation about the product, its design, its production and its management in the market…Suppliers should be able to recognize a product’s development through its documentation and trace its design, risk assessment, hazard analysis and testing decisions back to its conception.”

ISO 10377 is “aimed at small and medium sized enterprises (SMEs) as well as larger firms and offers risk assessment and management techniques for safer consumer products. This standard will allow retailers and OEMs to trace every part and component of a product through the supply chain to determine exactly where a defect or a counterfeit has occurred.” The standard is divided into four main sections outlining general principles that promote a product safety culture in a company, safety in design, safety in production and safety in the retail marketplace.

Either Mr. Uke’s “Transparent Label” or the label required by ISO 10377 would satisfy both reasons for wanting to know where products are manufactured. This type of label would provide protection for consumers from unsafe, defective, toxic, and counterfeit products and would help us to recognize the main cause of the loss of manufacturing jobs in the United States. We need to face up to the true cause of the loss of manufacturing jobs before we can get any consensus of what to do about it by means of our national policies. We need to oppose reclassifying “wholesale traders” as domestic manufacturers and support “country of origin” labeling by contacting our Congressional representatives.

 

 

 

 

How we could Create Jobs while Reducing the Trade Deficit and National Debt

Tuesday, March 26th, 2013

There are numerous ideas and recommendations on how we could create jobs but most job creation programs proposed involve either increased government spending or reductions in income or employment taxes at a time of soaring budget deficits and decreased government revenue. Other recommendations would require legislation to change policies on taxation, regulation, or trade that may be difficult to accomplish. The recommendations in this article focus on what could be done the fastest and most economically to create the most jobs while reducing our trade deficit and national debt.

Manufacturing is the foundation of the U. S. economy and the engine of economic growth. It has a higher multiplier effect than service jobs. Each manufacturing job creates an average of three to four other supporting jobs. So, if we focus on creating manufacturing jobs, we would be able to reduce the trade deficit and national debt at the same time.

The combined effects of an increasing trade deficit with China and other countries, as well as American manufacturers choosing to “offshore” manufacturing, has resulted in the loss of 5.7 million manufacturing jobs since the year 2000. If we calculate the multiplier effect, we have actually lost upwards of 17 to 22 million jobs, meaning that we have fewer taxpayers and more consumers of tax revenue in the form of unemployment benefits, food stamps, and Medicaid.

In 2012, the U.S. trade deficit with China reached a new record of $315 billion. According to a recent study by the Economic Policy Institute (EPI), the trade deficit with China cost 2.7 million U.S. jobs from 2001-2011. The Department of Commerce estimates that each $1 billion in trade deficit translates to about 13,000 lost jobs, so the $738 billion trade deficit in goods for 2012 cost upwards of 9,599,200 jobs.

What Congress Could Do

First, Congress should enact legislation that addresses China’s currency manipulation. Most economists believe that China’s currency is undervalued by 30-40% so their products may be cheaper than American products on that basis alone. To address China’s currency manipulation and provide a means for American companies to petition for countervailing duties, the Senate passed S. 1619 in 2011, but GOP leadership prevented the corresponding bill in the House, H. R. 639, from being brought up for a vote, even though it had bi-partisan support with 231 co-sponsors. On March 20, 2013, Sander Levin (D-MI), Tim Murphy (R-PA), Tim Ryan (D-OH), and Mo Brooks (R-AL) introduced the Currency Reform for Fair Trade Act in the House and a corresponding bill will be introduced in the Senate.

Second, Congress should strengthen and tighten procurement regulations to enforce “buying American” for all government agencies and not just the Department of Defense. All federal spending should have “buy America” provisions giving American workers and businesses the first opportunity at procurement contracts. New federal loan guarantees for energy projects should require the utilization of domestic supply chains for construction. No federal, state, or local government dollars should be spent buying materials, equipment, supplies, and workers from China.

My other recommendations for creating jobs are based on improving the competitiveness of American companies by improving the business climate of the United States so that there is less incentive for American manufacturing companies to outsource manufacturing offshore or build plants in foreign countries. The following proposed legislation would also prevent corporations from avoiding paying corporate income taxes:

  • Reduce corporate taxes to 25 percent
  • Make capital gains tax of 15 percent permanent
  • Increase and make permanent the R&D tax credit
  • Eliminate the estate tax (also called the Death Tax)
  • Improve intellectual property rights protection and increase criminal prosecution
  • Prevent sale of strategic U.S.-owned companies to foreign-owned companies
  • Enact legislation to prevent corporations from avoiding the U.S. income tax by reincorporating in a foreign country

It is also critical that we not approve any new Free Trade Agreements, such as the Trans-Pacific Partnership and Trans-Atlantic Partnership that are currently proposed. The U.S. has a trade deficit with every one of its trading partners from NAFTA forward, so Free Trade Agreements have hurt more than helped the U.S. economy.

What States and Regions Could Do

State and local government can work in partnership with economic development agencies, universities, trade associations, and non-profit organizations to facilitate the growth and success of startup manufacturing companies in a variety of means:

Improve the Business Climate – Each state should take an honest look at the business climate they provide businesses, but especially manufacturers since they provide more jobs than any other economic sector. The goal should be to facilitate the startup and success of manufacturers to create more jobs. I recommend the following actions:

  • Reduce corporate and individual taxes to as low a rate as possible
  • Increase R&D tax credit generosity and make the R&D tax credit permanent
  • Institute an investment tax credit on purchases of new capital equipment and software
  • Eliminate burdensome or onerous statutory and environmental regulations

Establish or Support Existing Business Incubation Programs, such as those provided by the members of the National Business Incubation Alliance. Business incubators provide a positive sharing-type environment for creative entrepreneurship, often offering counseling and peer review services, as well as shared office or laboratory facilities, and a generally strong bias toward growth and innovation.

Facilitate Returning Manufacturing to America – The Reshoring Initiative,  founded by Harry Moser in 2010, has a  mission to bring good, well-paying manufacturing jobs back to the United States by assisting companies to more accurately assess their total cost of offshoring, and shift collective thinking from “offshoring is cheaper” to “local reduces the total cost of ownership.” The top reasons for U. S. to reshore are:

  • Brings jobs back to the U.S.
  • Helps balance U.S., state and local budgets
  • Motivates recruits to enter the skilled manufacturing workforce
  • Strengthens the defense industrial base

According to Mr. Moser, the Initiative has documented case studies of companies reshoring showing that “about 220 to 250 organizations have brought manufacturing back to the U.S….with the heaviest migration from China. This represents about 50,000 jobs, which is 10% of job growth in manufacturing since January 2010.”

State and/or local government could facilitate “reshoring” for manufacturers in their region by conducting Reshoring Initiative conferences to teach participants the concept of Total Cost of Ownership, how to use Mr. Moser’s free Total Cost of Ownership Estimator™, and help them connect with local suppliers.

Establish Enterprise Zones and/or Free Trade Zones: Enterprise Zones provide special advantages or benefits to companies in these zones, such as:

  • Hiring Credits – Firms can earn state tax credits for each qualified employee hired (California’s is $37,440)
  • Up to 100% Net Operating Loss (NOL) carry-forward for up to 15 years under most circumstances.
  • Sales tax credits on purchases of up to $20 million per year of qualified machinery and machinery parts;
  • Up-front expensing of certain depreciable property
  • Apply unused tax credits to future tax years
  • Companies can earn preference points on state contracts.

States located on international borders could also establish Foreign Trade Zones (FTZs), which are sites in or near a U.S. Customs port of entry where foreign and domestic goods are considered to be in international trade. Goods can be brought into the zones without formal Customs entry or without incurring Customs duties/excise taxes until they are imported into the U. S. FTZs are intended to promote U.S. participation in trade and commerce by eliminating or reducing the unintended costs associated with U.S. trade laws

What Individuals Could Do

There are many things we could do as individuals to create jobs and reduce our trade deficits and national debt. You may feel that there is nothing you can do as an individual, but it’s not true! American activist and author, Sonia Johnson said, “We must remember that one determined person can make a significant difference, and that a small group of determined people can change the course of history.”

If you are an inventor ready to get a patent or license agreement for your product, select American companies to make parts and assemblies for your product as much as possible. There are some electronic components that are no longer made in the U. S., so it may not be possible to source all of the component parts with American companies. There are many hidden costs to doing business offshore, so in the long run, you may not save as much money as you expect by sourcing your product offshore. The cost savings is not worth the danger of having your Intellectual Property stolen by a foreign company that will use it to make a copycat or counterfeit product sold at a lower price.

If you are an entrepreneur starting a company, find a niche product for which customers will be willing to pay more for a “Made in USA” product. Plan to sell your product on the basis of its “distinct competitive advantage” rather than on the basis of lowest price. Select your suppliers from American companies as this will create jobs for other Americans.

If you are the owner of an existing manufacturing company, then conduct a Total Cost of Ownership analysis for your bill of materials to see if you could “reshore” some or all of the items to be made in the United States. You can use the free TCO worksheet estimator to conduct your analysis available from the Reshoring Initiative at www.reshorenow.org. Also, you could choose to keep R&D in the United States or bring it back to the United States if you have sourced it offshore.

If enough manufacturing is “reshored” from China, we would drastically reduce our over $700 billion trade deficit in goods. We could create as many as three million manufacturing jobs, which would, in turn, create 9 – 12 million total jobs, bringing our unemployment down to 4 percent.

You may not realize it, but you have tremendous power as a consumer. Even large corporations pay attention to trends in consumer buying, and there is beginning to be a trend to buy ‘Made in USA” products. As a result, on January 15, 2013, Walmart and Sam’s Club announced they will buy an additional $50 billion in U.S. products over the next 10 years.

U.S. voters supported Buy America policies by a 12-to-1 margin according to a survey of 1,200 likely general election voters conducted between June 28 and July 2, 2012 by the Mellman Group and North Star Opinion Research. The overwhelming support has grown since prior iterations of the same poll – Buy America received an 11-to-1 margin of support in 2011 and a 5-to-1 margin in 2010. A survey by Perception Services International of 1400 consumers in July 2012, found that 76% were more likely to buy a U.S. product and 57% were less likely to buy a Chinese product.

As a consumer, you should pay attention to the country of origin labels when they shop and buy “Made in USA” products whenever possible. Be willing to step out of your comfort zone and ask the store owner or manager to carry more “Made in USA” products. If you buy products online, there are now a plethora of online sources dedicated to selling only “Made in USA” products. Each time you choose to buy an American-made product, you help save or create an American job.

In his book, Buying America Back:  A Real-Deal Blueprint for Restoring American Prosperity, Alan Uke, recommends Country of Origin labeling for all manufactured products that “puts control in the hands of American consumers to make powerful buying choices to boost our economy and create jobs,” as well as reduce our trade deficit. The labels would be similar to the labels on autos, listing the percent of content by country of all of the major components of the product. This Country of Origin labeling would enable American consumers to make the decision to buy products that have most of their content “made in USA.”

If every American would make the decision to buy American products and avoid imports as much as possible, we could make a real difference in our nation’s economy. For example, if 200 million Americans bought $20 worth of American products instead of Chinese, it would reduce our trade imbalance with China by four billion dollars. During the ABC World News series called “Made in America,” Diane Sawyer has repeatedly said, “If every American spent an extra $3.33 on U. S.-made goods, it would create almost 10,000 new jobs in this country.”

In conclusion, if we want to create more jobs, reduce our trade deficit and national debt, we must support our manufacturing industry so that it could once again be the economic engine for economic growth. Following the suggestions in this article could make the “Great American Job Engine” roar once again.

“Lame Duck” Congress Should Pass These Two Important Bills

Monday, November 12th, 2012

While the focus of the “Lame Duck” Congress will be to keep us from falling off the cliff of financial ruin from reaching the debt ceiling and sequestration, there are two bills passed by one body of Congress but not the other that should be passed. Both of these bills would be beneficial to America’s manufacturing industry.

The first bill addresses a topic many Americans supported during the latter part of Governor Mitt Romney’s campaign for president ?  he “took a hard line in his campaign, promising to cite China for its currency peg on day one of his presidency. National polling makes clear that the American people overwhelmingly support such action on China’s brazen violations of world trade law, including its currency undervaluation.”

The Currency Exchange Rate Oversight Reform Act of 2011 (S. 1619) is an international trade bill that would establish US duties on imports from countries with undervalued currencies. The bill was approved by the Senate on October 11, 2011 by a vote of 63-35, but H.R.639, the Currency Reform for Fair Trade Act, has not been brought up for a vote yet in the House of Representatives even though it has strong bipartisan, majority support with 234 lawmakers, including 65 Republicans, as cosponsors. U.S. Rep. Sander Levin, D-MI and ranking member on Ways and Means, introduced the legislation. The bill remains in the Ways and Means Subcommittee on Trade.

Speaker of the House John Boehner (R-OH) has continued to block a vote on the bill despite overwhelming support. Speaker Boehner has said in statements that the United States should not dictate currency policy for another country and that he will oppose attempts to bring this bill to the floor for vote. It is clear that Speaker Boehner is single-handedly thwarting the majority will of both Congress and the American people. It is hard to understand why Boehner would stand in the way of such modest legislation to address China’s mercantilism.

On the Senate website, Sen. Sherrod Brown (D-OH) said, “China’s currency manipulation has already cost 3 million American jobs–2 million of which came from our manufacturing sector. The bill that passed [Oct. 11] could create 1.6 million American jobs.”

In 2010, the House passed a similar bill, H.R.2378, the Currency Reform for Fair Trade Act, by a strong, bipartisan vote of 348-79, including 99 Republicans, but the Senate failed to pass their version of the bill.

The problem of Chinese currency manipulation has actually gotten worse in the past year since the Senate bill passed. The New York Times’ Keith Bradsher “reports that Beijing has actually depreciated its currency more of late.  The Yuan fell nearly 1 percent against the dollar last month, and Bradsher says this is the “largest drop since Beijing officials unpegged the currency from the dollar in July 2005. The fact that Beijing can adjust its currency so precisely is proof yet again that it deliberately manipulates the Yuan to gain an export advantage.”

We cannot continue to run up a massive trade deficit with China. The U.S. trade deficit in goods and services increased from $500 billion in 2010 to $558 billion in 2011, an increase of $58 billion (11.6 percent). The massive sales of Chinese exports to the U.S. is fueled by China’s deliberately undervalued currency. By pegging its currency to the dollar at an artificially low rate, Beijing is making sure that its exports are exceedingly cheap in the U.S. Conversely, U.S. exports are more expensive due to this preferential currency rate.

How would this bill help? The bill calls for the Treasury Department to identify countries whose currencies are undervalued, and then instruct the Commerce Department to impose duties on imports from those aforementioned countries. Key points of the Currency Exchange Rate Oversight Reform Act of 2011 include:

* Improves the oversight of the currency exchange rate by the Treasury.

* Clarifies the countervailing duty law to address currency under-evaluation.

* States that Commerce may not refuse to investigate a subsidy allegation. This clarification is supported by the WTO’s Appellate Body and is a key element in the previous Brown-Snowe currency bill and in HR 2378, which passed in September 2010.

* Triggers a series of consequences, including:  Immediate: “consider designation of a country’s currency as a ‘priority’ currency when determining whether to grant the country ‘market economy’ status for purpose of U.S. antidumping law.”

After 90 days: “forbid federal procurement of goods and services from the designated country unless that country is a member of the WTO Government Procurement Agreement,” and “forbid Overseas Private Investment Corporation financing or insurance for projects in the designated country.”

After 360 days and failure to adopt appropriate policies: “The administration must require the U.S. Trade Representative to request dispute settlement consultations in the World Trade

Organization with the government responsible for the currency,” and “require the Department of Treasury to consult with the Federal Reserve Board and other central banks to consider remedial intervention in currency markets.”

The bill also stipulates that “countries that fail to fix their currencies would be subject to higher anti-dumping duties and other penalties, such as a procurement ban, not receiving financing from the Overseas Private Investment Corporation, and U.S. opposition to multilateral bank financing for the targeted countries.”

Passage of this bill would be an obvious step forward to provide a level playing field for America’s manufacturers and their workers.

The other important bill, “The American Manufacturing Competitiveness Act” (HR-5865), co-sponsored by Illinois Reps. Dan Lipinski (D) and Adam Kinzinger (R), passed the House on September 12, 2012 by a vote of 339-77.

“H.R. 5865 establishes the American Manufacturing Competitiveness Board within the Department of Commerce to advise the President on issues affecting manufacturing in the United States. The board would be required to perform a comprehensive analysis of the nation’s manufacturing sector and, using results from the analysis, develop a strategy to improve the competitiveness of domestic manufacturing efforts. Results from the analysis and strategy would be available to the President to comply with the bill’s requirement to publish a strategy in 2014 and again in 2018 to promote growth in the nation’s manufacturing sector.”

The board would consist of 15 members: five from the public sector appointed by the President, including two governors from different parties; and 10 people from the private sector appointed by the House and the Senate, with the Majority appointing three and the Minority appointing two from each chamber.

In preparing the analysis, the board would be required to study, among other things:

  • The current environment for manufacturing, including government policies—at the international, federal, state, tribal, and local levels—that affect the sector;
  • Forecasts, both short- and long-term, for domestic and international trends in manufacturing;
  • Actions by federal agencies that affect manufacturing; and
  • Factors that affect the growth and stability of the sector such as workforce skills;
  • Trade, energy, and monetary policies; research and development; and protections for intellectual property.

Using results from the analysis, the board would be required to develop a strategy to improve the competitiveness of the nation’s manufacturing sector. The bill would require the strategy to include recommendations to eliminate or consolidate government programs, improve interaction between the government and the manufacturing sector, and amend any regulations that put the industry at a competitive disadvantage in international markets.

The final report also would be required to include a plan to implement the strategy, including an estimate of the cost to implement it as well as recommendations for ways to cover those costs.

In April 2011, The Information Technology& Innovation Foundation (ITIF) released a report, “The Case for a National Manufacturing Strategy,” that made a strong case for such a strategy. Authors Stephen Ezell and Robert Atkinson present information on five key reasons why manufacturing is important to the U.S. economy:

1.      It will be extremely difficult for the United States to balance its trade account without a healthy manufacturing sector.

2.      Manufacturing is a key driver of overall job growth and an important source of middle-class jobs for individuals at many skill levels.

3.      Manufacturing is vital to U.S. national security.

4.      Manufacturing is the principal source of R&D and innovation activity.

5.      The manufacturing and services sectors are inseparable and complementary.

The authors also present three primary reasons on why the United States needs a manufacturing strategy:

1.      Other countries have strategies to support their manufacturers and by lacking similar strategies we are therefore forcing our manufacturers to compete at a disadvantage.

2.      Systemic market failures mean that absent manufacturing policies, U.S. manufacturing will underperform in terms of innovation, productivity, job growth, and trade performance.

3.      If a country loses complex, high-value-added manufacturing sectors, it is unlikely to get them back, even if the dollar were to decline dramatically.

While not perfect, this bill would be a good start in developing a national manufacturing strategy. Contact your senator or representative to urge them to vote on these bills.

 

What’s Really Happening to America’s Solar Industry?

Tuesday, February 21st, 2012

There’s been a lot of negative press about the American solar industry in the past few months because six companies went bankrupt in 2011, even after receiving government loans.   At least 12 U.S. manufacturers have suffered layoffs, plant shutdowns or bankruptcies over the past two years.  Solyndra and Evergreen Solar are the most well-known because of media coverage about their government loans, but Beacon Power Corp, Mountain Plaza, Stirling Energy Systems, and Spectrawatt Inc. also went out of business, resulting in the loss of thousands of jobs.  What’s behind the financial trouble that many of these American solar companies have experienced?

“Dumping” of solar cells and modules produced in China is the real culprit for the financial woes of the American solar industry.  According to a report released by George Washington University in December 2011, China’s production of solar photovoltaic cells and modules has grown from 1 gigawatt (GW) to 20 GW in three years, and its industry now accounts for more than 50 percent of the global market.  During the same period, prices for solar modules decreased to $1.40 per watt and may go down as low as $1 per watt.  It is clear that over capacity in both purified silicon feedstock and module manufacturing have played a key role in the recent major price declines.  The annual market for solar more than doubled between 2009 and 2010.  For 2011, estimates of total market range from 21 to 24, which is a 44 percent increase from the year prior.

On October 19, 2011, SolarWorld, the largest U.S. producer of crystalline silicon photovoltaic products, filed antidumping and countervailing duty petitions at the International Trade Commission (ITC) of the Department of Commerce.  The petition alleges that China is unfairly subsidizing its solar manufacturing industry with cash grants, multi-billion dollar preferential loans, raw material discounts, tax incentives, and currency manipulation.  SolarWorld seeks to establish that Chinese companies could not possibly have production costs low enough to be selling modules and cells at their current prices in the U.S.

SolarWorld’s petitions were supported by six other members of the newly formed Coalition for American Solar Manufacturing, started by a group of seven U.S. solar manufacturers that has grown to 150 companies representing employing more than 14,650 workers.  However, SolarWorld was the only U.S. manufacturer identified publicly in these petitions because the “unnamed companies are said to fear retaliation from essential Chinese suppliers and customers and, if they have facilities in China, the Chinese government.”

China’s Ministry of Foreign Commerce responded to these petitions as being overly protectionist and a threat to global economic recovery. China’s Suntech, the world’s largest solar panel maker, with manufacturing facilities in Goodyear, Arizona, stated that “a misguided solar trade conflict against China…could threaten the livelihood of the global solar ecosystem, particularly solar jobs in the U.S.”

U. S. opponents of the petition have formed the Coalition for Affordable Solar Energy (CASE) recruiting 132 solar companies as members representing 13,134 jobs.  Kevin Lapidus, Sr. V. P<> of legal and government affairs for SunEdison, a lead member of CASE, said “Today the solar industry is 100,00 employees of which 57 percent are in the installation business, 21 percent are in sales and distribution, and only 14 percent are in manufacturing.”  These companies benefit from the cheap Chinese products they sell, distribute, and install.

The petitions request that the ITC investigate imports of Chinese crystalline solar cell and modules but exclude thin-film products and solar technology that is not photovoltaic, such as solar thermal products.

The petitions seek relief for the U.S. domestic companies injured by Chinese imports and seek duties to offset Chinese dumping alleged to exceed 100 percent.  “The countervailing duty petition alleges that China illegally subsidizes its solar industry by providing cash grants; discounted polysilicon and aluminum necessary for production of solar panels; heavily discounted land, power and water; multi-billion dollar preferential loans and directed credit; tax exemptions, incentives and rebates; and export grants and insurance. The countervailing duty petition also alleges that China’s currency undervaluation is an illegal subsidy.”

The next step is for the ITC to decide whether the petitions are legally and factually sufficient and are adequately supported by the U.S. industry.  During such investigations, the Commission gathers information from the U.S. industry and the ITC gathers information from the foreign government and industry.

On December 2, 2011, the ITC issued a unanimous preliminary determination that Chinese trade practices are harming the U.S. domestic solar manufacturing industry.  The next step in the trade case will be Commerce’s preliminary determination on whether to levy countervailing import duties to offset the effects of any illegal Chinese subsidies.  The finding of “critical circumstances” means that if the agency imposes preliminary countervailing duties on March 2, the duties will apply to all imports of cells and modules from Chinese exporters that were brought into the United States starting Dec. 3, 2011.

This critical-circumstances ruling marks the first time that Commerce has issued such a finding in advance of a preliminary countervailing duty determination.  Aside from the determination on countervailing duties, the agency is scheduled to issue a separate preliminary ruling on anti-dumping duties on March 27.  Commerce will issue a separate critical-circumstances ruling in the anti-dumping investigation. A final decision from the U. S. ITC can take up to a year.

On February 7, 2012, the National Renewable Energy Laboratory posted a revised research presentation on the NREL website, which CASM praised.  The presentation concludes Chinese production of crystalline silicon solar technology for the U.S. market costs more than U.S. production for the domestic market, when the costs of shipping are included.

CASM contends the findings validate its position that the Chinese solar-manufacturing industry doesn’t enjoy a cost advantage in solar production costs but, rather, benefits from a government-underwritten export campaign designed to injure competition from U.S. manufacturers.

The NREL presentation, “Solar PV Manufacturing Cost Analysis: U.S. Competitiveness in a Global Industry,” concludes that Chinese producers have an inherent cost advantage of no greater than one percent, compared with U.S. producers.  However, when trans-ocean shipping costs are counted, Chinese producers face a 5 percent cost disadvantage, according to the analysis…Massive government subsidies the government says, sponsor the Chinese industrial drive to export about 95 percent of domestic production, a campaign that has already seized 55 percent of global market share.”

“This analysis from the renewable-energy research arm of the U.S. government corroborates our view that an export drive sponsored by the Chinese government is improperly intervening in the U.S. market,” said Gordon Brinser, president of SolarWorld Industries America Inc., based in Oregon.  “Highly efficient U.S. producers like SolarWorld can vie with any company in the world in legal competition.  But the government of China’s illegal trade practices are neither economically nor environmentally sustainable for anyone.  Free trade is trade free of illegal foreign government intervention.”

“We are countering the illegal trade practices of China and its state-sponsored industry only as a first step to reviving renewable-energy competition, manufacturing and jobs and augmenting national energy security and world environmental stewardship,” Brinser said. “All of the advantages of solar should be available to the United States and to the competitive U.S. industry that pioneered this technology.”

Chinese silicon solar PV producers more than doubled their exports of crystalline silicon solar cells and modules in advance of potential U.S. government duties on those imports, according to an evaluation of PIERS’ reports, which are based on US Customs and Border Protection Automated Manifest System data.

“This significant increase in imports demonstrates that the Chinese know they have violated U.S. and international trade rules and are trying to evade the consequences,” said Gordon Brinser, president of SolarWorld Industries America Inc., based in Oregon.  “Year to date, Chinese imports of solar cells and modules in 2011 are up 346 percent by quantity and 138 percent by value. Since 2008, Chinese imports have risen 939 percent by value and 1664 percent by quantity.  This most recent surge of Chinese solar imports gives the U.S. Department of Commerce the evidence it needs not only to make a preliminary determination in our favor, but also to apply a critical-circumstances finding to address this last-minute import surge.”

“The Chinese have made it clear that, contrary to various World Trade Organization agreements they signed 10 years ago, they will employ any means necessary to dominate the American and international solar markets,” Brinser said.  “Rather than reward the Chinese for cheating, Commerce and the International Trade Commission need to take every possible action to enable American manufacturers to compete fairly.”

Most of the solar technology was developed in the U. S., but the Chinese government decided the industry was something it wanted to dominate and provided the financing necessary to its manufacturers to build the capacity to do so enabling China to take a dominant market position. Chinese companies such as LDK Solar, JA Solar, Suntech, and Trina Solar obtained billions of dollars in financing from the China Development Bank in the last five years.

In contrast, the U.S. solar industry has had to rely on a tax credit to fund its expansion until federal stimulus money gave a jolt to the industry.  This funding was given to solar and wind project installers, not manufacturers. Investor advisor, Travis Hoium wrote, “Since it was a tax credit, it often required a tax equity investor, often a foreign company, to fund the project. The subsidy was there, but instead of being direct, it was convoluted and too complex to be as effective as China’s subsidies in building an industry.”

He added, “The stimulus money helped in some ways. The 1603 Treasure Program turned the tax credit into a cash grant for 30% of a renewable energy installation’s cost, helping attract more investors. But more direct funding blew up in the government’s face.  The Solyndra debacle showed that loan guarantees don’t guarantee success and that the government probably isn’t the best at picking industry winners.  The outrage after the company’s collapse could be heard around the country.”

This shows the contrast in the ways that China and the U.S. have subsidized their solar industries.  As a capitalistic economy, the U. S. doesn’t want direct government meddling in business.  On the other hand, China will subsidize businesses to create jobs and help them maintain their position as the world’s #1 exporter.

Filing a trade case is the last resort for an industry harmed by China’s “dumping,” government subsidies, and currency manipulation.  Other industries that have been forced to file similar cases are steel, semiconductors, textiles, furniture, and tires.  This latest case is part of a long trend of industries on the verge of being wiped out by China’s predatory mercantilism.  Our elected leaders seem to be afraid to do anything because it would start a trade war.  When are our leaders going to realize that we are already in a trade war, and China is winning?  If China can defeat us in an economic war and destroy the economy of the United States, they won’t have to fight us in a military war.  It’s time for our elected to have the courage to stand up to China and address China’s “dumping” and currency manipulation.  We Americans need to demand action!

 

 

 

 

 

 

 

 

 

Why We Don’t Need a New Program to Train America’s Manufacturing Workers

Tuesday, January 31st, 2012

In his State of Union address, President Obama placed American manufacturing at the center of a “blueprint” for bringing back jobs and strengthening our economy.  After years of being one of the “voices in the wilderness” urging our elected leaders to “save American manufacturing,” it was gratifying to hear manufacturing being given such prominence.

I am concerned, though, that his idea of “one program, one website, and one place to go for all the information and help” American workers need for training or retraining for jobs would result in more government control and more deficit funding, adding to the burden of debt for American taxpayers.  We don’t need to wait for government to come up with a new program and spend taxpayer dollars developing new curricula for training for manufacturing jobs.   We don’t need to wash years of work and collaborations between industry, trade and professional organizations, colleges, and universities down the drain.  A great deal has already been done and is being done to train and retrain today’s workers and prepare the next generation of manufacturing workers.

When considering training, we need to understand the difference between certification versus a certificate.  Certificate programs are training based on proprietary criteria/curriculum and sometimes include an exam without any recertification requirements. Numerous training companies, educational institutions, and individual training consultants compete to sell training courses that purportedly include “certification.”  In many cases, these are not based on a standard body of knowledge as developed by objective third-party entities, but rather paper certificates awarded for specific training.  Certificate programs are useful to prepare workers for entry-level positions in many industries.

Certifications are based upon profession and competency.  Certifications are independent, third-party assessments of knowledge, skills, and experience based upon a known publicly available standard overseen by industry.  The exam includes legally defensible content and can be referenced back to widely available industry accepted references.  Recertification is a key component and ensures individuals show evidence of continued learning.  Professional certification is a designation earned by a person to assure they meet the minimum knowledge requirements of the profession and is transferable from state to state and company to company.

For example, the National Institute for Metalworking Skills (NIMS) was formed in 1995 by the metalworking trade associations to develop and maintain a globally competitive American workforce.  NIMS sets skills standards for the industry, certifies individual skills against the standards, and accredits training programs that meet NIMS quality requirements.   NIMS operates under rigorous and highly disciplined processes as the only developer of American National Standards for the nation’s metalworking industry accredited by the American National Standards Institute (ANSI).

NIMS has a stakeholder base of over 6,000 metalworking companies. The major trade associations in the industry- the Association for Manufacturing Technology, the American Machine Tool Distributors’ Association, the National Tooling & Machining Association, the Precision Machine Products Association, the Precision Metalforming Association, and the Tooling and Manufacturing Association have invested over $7.5 million in private funds for the development of the NIMS standards and its credentials.  The associations also contribute annually to sustain NIMS operations and are committed to the upgrading and maintenance of the standards.

NIMS has developed skills standards in 24 operational areas covering the breadth of metalworking operations including metalforming (Stamping, Press Brake, Roll Forming, Laser Cutting) and machining ( Machining, Tool and Die Making, Mold Making, Screw Machining, Machine Building and Machine Maintenance, Service and Repair). The Standards range from entry (Level I) to a master level (Level III).  All NIMS standards are industry-written and industry-validated, and are subject to regular, periodic reviews under the procedures accredited and audited by ANSI.

NIMS certifies individual skills against the national standards.  The NIMS credentialing program requires that the candidate meet both performance and theory requirements.  Both the performance and knowledge examinations are industry-designed and industry-piloted. There are 52 distinct NIMS skill certifications.  Industry uses the credentials to recruit, hire, place and promote individual workers.  Training programs use the credentials as performance measures of attainment, often incorporating the credentials as completion requirements and as the basis for articulation among training programs.

NIMS accredits training programs that meet its quality requirements.  The NIMS accreditation requirements include an on-site audit and evaluation by a NIMS industry team that reviews and conducts on-site inspections of all aspects of the training programs, including administrative support, curriculum, plant, equipment and tooling, student and trainee progress, industry involvement, instructor qualifications and safety.   Officials governing NIMS accredited programs report annually on progress and are subject to re-accreditation on a five year cycle.
NIMS has launched a new Competency-based Apprenticeship System for the nation’s metalworking industry.  The NIMS system represents a dramatic departure from the time based system and integrates the NIMS national standards and skill certifications in defining and measuring required competencies.

Developed in partnership with the United States Department of Labor, the new system is the result of two years of work.  Over 300 companies participated in the deliberations and design.   The new National Guideline Standards for NIMS Competency-based Apprenticeship have been approved by the Department of Labor.  NIMS has trained Department of Labor apprenticeship staff at the national and state level in the new system.

Another professional organization that provides certification is the Society of Manufacturing Engineers (SME), the world’s leading professional society advancing manufacturing knowledge and influencing more than half a million manufacturing practitioners annually.  Through its local chapters, technical communities, publications, expositions, and professional development resources, SME promotes an increased awareness of manufacturing engineering and keeps manufacturing professionals up to date on leading trends and technologies.  SME provides the following professional certifications:  Manufacturing Technologist, Manufacturing Engineering, Engineering Manager, Lean Certification (Bronze, Silver, and Gold), and Six Sigma.

SME’s Certified Manufacturing Technologist program is utilized as an outcome assessment by numerous colleges and universities with Manufacturing, Manufacturing Engineering or Engineering Technology programs.  Students who successfully earn the certification demonstrate broad knowledge and its application as related to the fundamentals of manufacturing, which sets them apart from other potential job candidates.In addition, the SME Education Foundation has the mission to prepare the next generation of manufacturing engineers and technologists through outreach programs to encourage students to study Science, Technology, Engineering, and Mathematics (STEM) as well as Computer Integrated Manufacturing (CIM) education.  Over its 30-year history, SME has invested $17.3 million in grants to 35 colleges and universities to develop industry-driven curricula.

In 2010, the Society of Manufacturing acquired Tooling University LLC (Tooling U) based in Cleveland, Ohio to provide online, onsite, and webinar training for manufacturing companies and educational institutions. With more than 400 unique titles, Tooling U offers a full range of content to train machine operators, welders, assemblers, inspectors, and maintenance professionals.  These classes are delivered through a custom learning management system (LMS), which provides extensive tracking and reporting capabilities. The competencies tie the online curriculum to matching hands-on tasks that put the theory to practice.

The Fabricators and Manufacturers Association, International (FMA) champions the success of the metal processing, forming, and fabricating industry.  FMA educates the industry through the following programs:

FabCast – FMA’s webinar platform utilizes Internet connection and telephone to deliver live, interactive technical education programs directly to manufacturers on such topics as laser cutting, roll forming, metal stamping, etc.  Companies can train their whole team at once, even from multiple locations.  Companies can break up full days of instruction into modules and spread out over a period of time (i.e. two hours four days a week, four hours once a week for a month, etc.).

Precision Sheet Metal Operator (PSMO) Certification – FMA’s PSMO Certification is the metal fabricating industry’s only comprehensive exam designed to assess a candidate’s knowledge of fundamental precision sheet metal operations.  Fabrication processes covered in the exam include shearing, sawing, press brake, turret punch press, laser cutting, and mechanical finishing.

FMA offers on-site, live training conducted at companies on their equipment as well as on-line training (e-Fab) that allows a company to get the training that they need, when they need it.  E-Fab courses combine a full day’s worth of instruction by FMA’s leading subject matter experts with the flexibility of online delivery, available 24/7, 365 days a year.

Finally, there is ASQ, which is a global community of people passionate about quality who use the tools, the ideas, and their expertise to make the world work better.  ASQ certification is a formal recognition that an individual has demonstrated a proficiency within, and comprehension of, a specific body of knowledge.  ASQ certification crosses industry lines, ranging from Biomedical Auditor, Quality Technician, Inspector, and Engineer, Reliability Engineer, Six Sigma Black Belt to Software Quality Engineer.  Nearly 150,000 certifications have been issued to dedicated professionals worldwide.

Training and retraining workers who are unemployed or underemployed are critical for the health and growth of the manufacturing industry, which will create good-paying jobs.  The focus of a one-stop website for employment should be to distribute the training and certifications provided by the above-listed organizations at the national level down to the local level.

 

 

 

 

 

What Have Been the Consequences of China’s Accession to the WTO?

Tuesday, December 13th, 2011

The recently-released U.S.-China Economic and Security Review Commission report states that is has been ten years since China joined the World Trade Organization (WTO), and “the concerns that originally surrounded China’s accession to the WTO—that China’s blend of capitalism and state-directed economic control conflict with the organization’s free market principles—have proven to be prophetic.”  What have been the consequences of China’s accession to the WTO and what are the implications for the future?

At that time, China did not meet all of the traditional requirements for accession, but the WTO took a calculated gamble that China could effectuate the reforms necessary to conform to those requirements within a reasonable period of time. The U.S.-China Economic and Security Review Commission was established by the United States Congress in part to monitor the outcome of that gamble.

Ten years later, it’s obvious from the reports that the WTO lost the gamble.  The recent Commission reports that China’s state-directed financial system and industrial policy continues to contribute to trade imbalances, asset bubbles, misallocation of capital, and dangerous inflationary pressures…China’s adherence to WTO commitments remains spotty despite the decade that the country’s rulers were given to adjust.”  As a result, these circumstances create an uneven playing field for China’s trading partners and threaten to deprive other WTO signatories of the benefit of their bargain.  This is an understatement of the effect on the economy of China’s main trading partner ? the United States.

Chapter one analyzes these issues, beginning with an examination of U.S.-China trading and financial relations and concluding with an evaluation of China’s role in the WTO.    It also examined the implications of China’s being relieved of its burden of facing an annual review by the WTO of its compliance due to the fact that the ten-year probationary period ends this year

U.S.-China Trading Relations

For the first eight months of 2011, China’s goods exports to the United States were $255.4 billion, while U.S. goods exports to China were $66.1 billion, yielding a U.S. deficit of $189.3 billion.  This represents an increase of nine percent over the same period in 2010 ($119.4 billion). During this period China exported four dollars’ worth of goods to the United States for each dollar in imports China accepted from the United States. In 2010, the United States shipped just seven percent of its total exports of goods to China; China shipped 23 percent of its total goods exports to the United States.

In the ten years since China joined the WTO, the U.S. trade deficit with China has grown by 330 percent.  This trade deficit is not explained by a broader trend of American dependence on imports.  In the first eight months of 2011, Chinese goods accounted for 20 percent of U.S. imports, while U.S. goods accounted for only five percent of Chinese imports.  China’s portion of America’s trade deficit has nearly tripled  ? from 22 percent in 2000 to 60 percent in 2009 and 55 percent in 2010 – while the overall U.S. trade deficit with the world has grown from $376.7 billion in 2000 to $500 billion in 2010.

China’s Share of the U.S. Global Trade Deficit (by percentage), 2000–2010

Source: U.S. Bureau of the Census, U.S. Trade in Goods and Services (Washington, DC: U.S. Department of Commerce, August 15, 2011).

The Commission states “These data suggest that the growth in the U.S. global trade deficit reflects growth in the U.S. trade deficit with China and that other emerging economies are being replaced by China as a final supplier of finished exports to the United States.”  Of more serious concern is not the size of the U.S. trade deficit with China but the composition of goods.   Chinese manufacturing has undergone a dramatic restructuring during the last ten years, away from labor-intensive goods toward investment-intensive goods.  Production now is driven less by low-cost labor and more by low-cost capital, which is being used to build next-generation manufacturing facilities and to produce advanced technology products for export.  This is demonstrated by the decrease in Chinese exports of labor-intensive products, such as clothing, footwear, furniture, and travel goods as a percentage of total exports.  In 2000, exports of these labor-intensive products constituted 37 percent of all Chinese exports. By 2010, this percentage had fallen to just 14 percent.

It’s apparent that this shift has serious implications for the U.S. economy.  When China joined the WTO, the United States had already lost production of low-value-added, low-wage-producing commodities such as clothing and toys.  But America’s export strength lay in complex capital goods, such as aircraft, electrical machinery, generators, and medical and scientific equipment.   “From 2004 to 2011, U.S. imports of Chinese advanced technology products grew by 16.5 percent on an annualized basis, while U.S. exports of those products to China grew by only 11 percent.6 In August 2011, U.S. exports of advanced technology products to China stood at $1.9 billion, while Chinese exports of advanced technology products to the United States reached $10.9 billion, setting a record one-month deficit of more than $9 billion. On a monthly basis, the United States now imports more than 560 percent more advanced technology products from China than it exports to that country.

U. S. Exports to and Imports from China of Advanced Technology  Products in the Month of June ($ billion) 2004-2011 Source: U.S. Bureau of the Census, U.S. Trade in Goods and Services (Washington, DC: U.S. Department of Commerce, August 15, 2011).

The Commission states that “the weakness in U.S. exports of advanced technology products to China is explained in part by barriers to market access experienced by U.S. companies attempting to sell into the Chinese market.”  Import barriers are part of China’s policy of switching from imports to domestically produced goods.  China’s policy of ‘‘indigenous innovation’’ protects domestically produced goods by discriminating against imports in the government procurement process, particularly at the provincial and local levels of government.

Seventy-one percent of American businesses in China believe that foreign businesses are subject to more onerous licensing procedures than Chinese businesses according to a recent survey conducted by the American Chamber of Commerce in China.  A similar 2011 study by the European Chamber of Commerce in China found that inconsistencies in the procurement process employed by the Chinese central government resulted in a lost opportunity for European businesses that is equal in size to the entire economy of South Korea, or one trillion dollars.

China’s Role in the WTO

Since the last Report, the U. S. brought three new, China-related disputes to the WTO.  “On December 22, 2010, the United States requested consultations with China over its subsidies for domestic manufacturers of wind power equipment (DS419).  The European Union (EU) and Japan joined the consultations in January.  The case has not yet advanced to the hearing stage.  In the second case, the U. S. requested consultations with China regarding its imposition of antidumping duties on chickens imported from the United States.   In addition, on October 6, 2011, the U.S. Trade Representative submitted information to the WTO identifying nearly 200 subsidies that China, in contravention of WTO rules, failed to notify to the WTO.  Three previous WTO cases involving U.S.-China trade are both open and active. The Raw Materials case, which resulted in a decision favorable to the United States, is under appeal as of August 31, 2011.  The Flat-rolled Electrical Steel case and the Electronic Payments case have both advanced to formal dispute settlement, though no decision has been reached…The United States has brought a total of seven cases against China at the WTO concerning subsidies or grants. Of the seven, four were settled through consultation, two were decided in favor of the United States, and one remains undecided.”

China’s WTO Probationary Period Ends This Year

During the 15 years of negotiations leading up to China’s accession, the United States and the European Union expressed concern about potential negative consequences that might befall the WTO due to China’s sheer size and lack of a market-based economy and they insisted on a series of China-specific admission requirements.  “The centerpiece of this ‘WTO–Plus’ admission package was the Transitional Review Mechanism, which required China to submit to an annual review for the first eight years of its membership in the organization, as well as a final review in the tenth year.  The Transitional Review Mechanism is in addition to, rather than in lieu of, the normal review procedure, known as the Trade Policy Review Mechanism that all WTO members must undergo every few years in perpetuity.”

The temporary Transitional Review Mechanism appeared to be more stringent than the Trade Policy Review Mechanism.  “However, the procedural aspects of the Transitional Review Mechanism rendered it a paper tiger.  Reports produced by the Transitional Review Mechanism require the unanimous consensus of all members involved, including China.  This puts China in the position of acting as judge in its own trial,” so that the result consistently has been ‘‘light and generally unspecific criticism,” according to trade scholars such as William Steinberg.

The Transitional Review Mechanism provided the United States with a somewhat useful tool for fact-finding and focusing attention on controversies within the U.S.-China trade relationship, but this is the final year of the Transitional Review Mechanism as China’s tenth year of WTO membership.  The consequences of this are:

  • The tools available to the United States to carry out fact-finding related to China’s compliance with WTO obligations will now be limited to the Trade Policy Review Mechanism and the various review channels of individual subsidiary bodies.
  • China’s membership in the WTO has reached a point of chronological maturity at which China was expected to be in full compliance with its WTO obligations.

China initially “accepted the China-specific rules contained in the protocol of accession, avoided litigation within the WTO, and was quick to comply with all demands of the WTO’s dispute resolution process.”  But after ten years of observing and learning the subtleties of WTO procedural law, “Beijing has become much more aggressive about bringing claims against trading partners, appealing decisions that are rendered against its favor, and pushing the envelope of noncompliance. Additionally, China has grown very savvy about using the dispute settlement process and bilateral free trade agreements to undermine the effectiveness of China-specific rules.”

According to a recent study by international trade law scholars at the University of Hong Kong, of the five WTO cases filed by China between September 2008 and March 2011, four of them were designed to use the dispute settlement process to change or undo rules contained in China’s Accession Protocol and purposely focused on the vague terminology found in the Protocol.

China has exploited the vague terminology by using creative interpretations to render entire provisions inapplicable.  “Since 2002, China has concluded nine free trade agreements and commenced negotiations for five more.  In all 14, a precondition to negotiation has been agreement by the other party to grant China market economy status.  These preconditions are targeted toward eliminating certain restrictions placed upon China during accession to the WTO,”  particularly, “the one in which the instituting party is allowed to use price comparisons from third-party countries in order to show dumping behavior by Chinese companies” when antidumping proceedings are instituted against China.

Also, for purposes of identifying illegal subsidies and calculating countervailing measures, “the instituting party may act with reference to prices and conditions prevailing in third-party countries in lieu of China.”  However, under the terms of the Accession Protocol, “China’s nonmarket-economy status is set to expire in 2016, at which time these provisions will cease to have effect.”

However, “the expiration in 2016 of China’s status as a nonmarket economy under the Accession Protocol does not negate applicable U.S. domestic law, which will continue to have effect beyond 2016.   If enough WTO members accord market economy status prematurely to China, it will diminish support for Washington’s position that China has a long way to go to merit market economy status.  China has more bargaining power in bilateral negotiations with smaller nations than it does in multilateral negotiations at the WTO.”  The Commission concluded that “China hopes gradually to undermine the Washington consensus, strong-arm its way into market economy status, and shake free of restrictive terms and obligations in its accession agreement” by pushing for concessions from a series of bilateral negotiations under the auspices of free trade agreements.  In addition, “China is not willing to comply fully with the decisions of the WTO dispute settlement process and prioritizes the preservation of its own political system above fidelity to WTO commitments.”

Implications for the United States

The Report states, “The U.S. trade deficit with China has ballooned to account for more than half of the total U.S. trade deficit with the world and creates a drag on future growth of the U.S. economy.  This problem has many causes, among which are barriers to U.S. exports and continued undervaluation of the RMB.  The result is lost U.S. jobs. While the exact number of U.S. jobs lost to China trade is hotly disputed—economist C. Fred Bergsten has estimated 600,000 jobs on the low end, while the Economic Policy Institute has estimated 2.4 million jobs on the high end—many parties agree that the costs are staggering.”

While the Chinese RMB has appreciated by roughly six percent over the course of the last year, there is widespread agreement that it remains deeply undervalued (30-40 percent according to some economists). As a result, “U.S. exports to China remain subject to a de facto tariff, Chinese exports to the United States remain artificially discounted, and Chinese household consumption remains suppressed.  The Report states this “contributes to a persistent pattern of massive and dangerous trade distortions, unnatural pools of capital, and dangerous inflationary pressures that threaten the stability of the global economy.”  China is no longer content to be the low-end factory of the world ? the government is intent on moving up the value chain into the realm of advanced technology products, high-end research and development, and next generation production  at the expense of America’s high-technology industries.  The Commission opines that “it no longer seems inconceivable that the RMB could mount a challenge to the dollar, perhaps within the next five to ten years.  Chinese financial authorities are laying the groundwork for these ambitions via a series of bilateral arrangements with foreign companies and financial centers.”

The U. S. and the EU went to considerable lengths during the 15-year negotiation process “to design and negotiate a system of checks and balances that would permit China to accede to the WTO without jeopardizing the smooth functioning of the organization or endangering the position of existing members in the international trading system.”  In less than ten years, “China has learned the nuances of WTO law and has begun to use it systematically to undo the finely wrought balance that U.S. and EU negotiators designed.  At the same time, China has shown that it will subordinate its international commitments to its domestic political preferences and deny to its trading partners the benefit of their bargain.”

This chapter concludes with the comment, “China has grown more assertive and creative in using WTO procedures to alleviate, eliminate, and avoid certain restrictions in the Accession Protocol.  At the same time, the WTO has ruled that China’s existing system of state monopoly over imports of cultural products is inconsistent with WTO obligations.  China has not yet complied fully with the WTO ruling, and the United States has the right to initiate further proceedings to compel China to do so.”  This is an understatement to say the least.

Has President Obama or his staff read any of the last three reports?  Has any Congressional rep, Senator, or their staffs ever read through any of the Commission’s reports during the past ten years?  If they did, why didn’t they insist on the Bush administration and now the Obama administration initiating proceedings to compel China to comply with their WTO obligations?   Why didn’t our government do anything about China’s currency manipulation, product “dumping,” and subsidies to State-owned enterprises before they destroyed many of our domestic industries?   Why is China’s ten year probationary period concluding without anybody doing anything to prevent their becoming a full member of the WTO?  Why hasn’t the news media asked any of these questions of our elected officials?   Americans have been betrayed by their leaders, and we need to hold them accountable.  Every candidate for president and President Obama better read this latest report and tell the American people what they intend to do to address China’s threat to our economy and national security. The question is whether the news media will have the courage to ask these hard questions during the campaign for president.  The future of the United States as a sovereign nation is at stake.

Trends that are Changing the Future

Tuesday, December 6th, 2011

A trend is a pattern of gradual change in a condition, output, or process that moves in a certain direction over time.  There are many trends that have occurred this year, but some are changing the way we work and conduct business.   We will take a look at just a few of them that are beginning to have an impact and could dramatically impact our lies if they continue in the future.

Biomimicry:  Humans have always looked to nature for inspiration to solve problems. One of the early examples of biomimicry was the study of birds to enable human flight.  The Wright Brothers, who created and flew the first airplane in 1903, derived inspiration for their airplane from observations of pigeons in flight.

The term biomimicry was popularized by scientist and author Janine Benyus in her 1997 book Biomimicry: Innovation Inspired by Nature. Biomimicry is defined in her book as a “new science that studies nature’s models and then imitates or takes inspiration from these designs and processes to solve human problems”.  Today, biomimicry is changing the way we research, invent, design, develop, and manufacture products.

The San Diego Zoo started its biomimicry programs in 2007, and the Zoological Society of San Diego recently partnered with Point Loma Nazarene University on an economic impact report looking into the feasibility of bringing another spoke into the region’s burgeoning green economy.  The report titled Biomimicry: An Economic Game Changer and estimated that biomimicry would have a $300 billion annual impact on the US economy, plus add an additional $50 billion in environmental remediation.

“The completed report articulates a compelling case for making the San Diego region a global biomimicry hub,” said Randy M. Ataide, executive director of the Fermanian Business & Economic Institute at Point Loma Nazarene University.  “Biomimicry could represent a revolutionary change in our economy by transforming many of the ways we think about designing, producing, transporting and distributing goods and services.”

An informal alliance to transform an esoteric concept into what they hope is the beginning of a future industry cluster has formed the Biomimicry Bridge (Business, Research, Innovation, Development, Governance and Education).  A memorandum of understanding to facilitate growth of the Bridge organization has been in place since 2008 between the San Diego Zoo, the City of San Diego, CONNECT, UC San Diego, San Diego State University, Point Loma Nazarene University, and the University of San Diego.

“The key to biomimicry is the value we place on natural systems and species,” said Paula Brock, chief financial officer for the San Diego Zoo. “Biomimicry offers an opportunity to bring successful economics together with conservation. We hope this study will inspire new companies and entrepreneurs to focus upon the development of this field.”

A key finding of the report is that biomimicry holds the potential to attract sizable capital inflows, driven by the prospects of rapid growth and high rates of return, and that venture capital potentially could flow into the field at a pace at least equal to that of biotech, estimated to be about $4.5 billion in the U.S. in 2010.

The San Diego Zoo and San Diego Zoo Safari Park house nearly 8,000 animals representing 840 species, and the San Diego Zoo’s accredited botanical garden has close to 40,000 species.  Allison Alberts, chief conservation and research officer for the San Diego Zoo, said “We are poised to offer the opportunity to be a living laboratory in helping biomimicry-based businesses grow.”  She added that the inspiration that comes from studying animals and plants could also be a revenue generator for the zoo. The study determined that the zoo is the only facilities-based provider of biomimicry services in the world and a natural to drive research and commercial applications.

A range of businesses in the region already are incorporating aspects of biomimicry in the design of products or ones they have on the drawing boards, said Ruprecht von Buttlar, director of finance and commercialization programs at CONECT, which serves as a networking group for investors, entrepreneurs and high-tech and life sciences professionals.

The San Diego Zoo’s Biomimicry website features a page on the latest news, research, and development of biomimetic products, a few of which are:

GreenShield: An environmentally friendly stain-resistant fabric finish inspired by lotus leaves:

Mirasol®, a display innovation by Qualcomm, mimics the microstructure of a butterfly’s wing to generate color without pigment in their handheld display technologies:

Biomatrica has developed DNA and RNA preservation technology based on the process in nature called anhydrobiosis:

Columbia Forest Products developed PureBond by manipulating soy proteins to behave like mussel byssal threads. Is the only urea-formeldehyde (carcinogen) free plywood glue on the market:

Cloud Computing: Cloud computing has become one of the hottest buzzwords in technology and  its birth as a term can be traced “to 2006, when large companies such as Google and Amazon began using ‘cloud computing’ to describe the new paradigm in which people are increasingly accessing software, computer power, and files over the Web instead of on their desktops.  It is an expansion of what has been known as software as a service (SaaS) in which cloud computing providers deliver applications via the internet that are accessed from web browsers and desktop and mobile apps, while the business software and data are stored on servers at a remote location.

This type of data center environment allows companies to get their applications up and running faster, with easier manageability and less maintenance, and enables IT to more rapidly adjust IT resources (such as servers, storage, and networking) to meet fluctuating and unpredictable business demand.

Cloud computing is all the rage. “It’s become the phrase du jour,” says Gartner senior analyst Ben Pring, echoing many of his peers. The problem is that (as with Web 2.0) everyone seems to have a different definition.

On the Hyland blog, Glenn Gibson offers a simpler definition:  “The Cloud” is a term used to describe a wide range of technologies, which are accessible through high-speed connections to the internet and private networks.

Cloud computing is at an early stage, with a growing number of providers large and small delivering a variety of cloud-based services, from full-blown applications to storage services to spam filtering.  Today, for the most part, IT must plug into cloud-based services individually, but cloud computing aggregators and integrators are already emerging.

Cloud computing is a long-running trend with a far-out horizon.  This year, TechAmerica San Diego added the new category of SaaS/Cloud for the first time at the 2011 High Tech Awards held on October 28th.    Four companies were finalists, and the winner, ServiceNow develops and delivers a comprehensive suite of cloud-based services for enterprise IT management. For a single low subscription price, ServiceNow customers have access to nearly 20 native applications built on a common, extensible platform. ServiceNow supports all common ITIL processes including incident, problem, change, request fulfillment, service level management and others.  The three other finalists were:  Kyriba, Syntricity Inc., and The Active Network.

Cloud computing is also changing the way manufacturing companies can become ISO Certified at a price affordable for companies as small as less than 25 employees and under $1.5 million in sales.   ION Quality Systems provides an innovative Quality Management System designed to revolutionize businesses. Their customizable management tools, experience, and exemplary customer service make them a partner in quality assurance. They can prepare you to get your AS9100, ISO 9001:2008 or other certification more efficiently, economically, and effectively than a traditional quality system in as little as 90 days.

However, there are concerns about the cyber security of cloud computing, and the June issue of National Defense magazine featured an article on “Cloud Computing Trend Sparks Compliance Concerns.”   Because the Obama administration has focused on cloud computing for future information technology needs, there is concern that “data stored in the cloud must always be accessible from any location, thereby increasing hacker vulnerability and the need ? without degrading fast encryption and decryption ? for robust measures to deflect security breaches.” This same cyber security concern was the focus of a symposium on “CLOUD.GOV?

The Promise, Limits, and Reality” held by the San Diego chapter of the National Defense Industry Association on October 11-13, 2011.

Social Media:  Social networking is not new; social networks have been around for far longer than people have been online. Everyone has belonged to social networks, and they still participate in social networks whether they know it or not.  What is new is social media that provides online social networking.  In addition to the more popular, Facebook, LinkedIn, and Twitter, there are Foursquare, Yelp, Groupon, and Living Social.   The BLÜ Group – Advertising & Marketing has published a free social media guide to help businesses of all sizes, particularly small and mid-sized businesses, connect with customers and potential customers, stay engaged with them, and ultimately grow their bottom line.

LinkedIn, Facebook and Twitter:  Most of us have been adding to our social media network to expand business opportunities, express opinions, and keep connected with people who change from one job to another.  Now, it is literally changing the way people conduct business, and view customers’ opinions and product ideas.  .

In the September 2011 issue of Industry Week, the article “Fueling Auto R&D with Social Media,” reported that Kia Motors Corporation  “decided to modify the seat design for their 2012 Optima as a result of a groundswell of complaints from consumers and automotive writers percolating on the Internet.”  Kia uses business intelligence software to monitor online comments about it vehicles and determined that it was bigger problem than they realized and needed to be fixed before the next major change in the model in a few years.

Ford also pays close attention to what people say about its products on social media such as Facebook and Twitter, and elsewhere on the internet.  Nissan Motor Company is also trying to grow it fan base on social media sites such as Facebook and Twitter to leverage the maximum impact when it launches new models.  Nissan is also using social media as a research tool.  In August 2011, Nissan invited its more than 300,000 Facebook fans to suggest names for a new optional interior package for the Nissan Cube.  Eric Marx of Nissan said using social media to make ”real business decisions it absolutely the future. “  A cottage industry is emerging to aggregate the vast amount of online comments into actionable data.  Nielsen Online’s BuzzMetrics software promises to deliver consumer insights and real-time market intelligence, and WiseWindow’s MOBI (Mass Opinion Business Intelligence) software to predict consumer purchasing intent and behavior.

According to one of my friends that owns a staffing agency, LinkedIn is actually changing the way people seek and are being recruited for jobs.  Having a good LinkedIn profile can mean the difference between being hired or not.

Recruiters are searching the LinkedIn database to find candidates for specific positions.  They can use the free, “Advanced People Search” function available to all LinkedIn members. They can search members and activities within specific LinkedIn groups, and many others are using a paid service called LinkedIn Recruiter that provides significantly more search functionality.

In addition, similar to the way job seekers sign up for “job alerts” to get notified via email whenever a new job gets posted that meets a certain set of criteria, recruiters can also sign up for candidate alerts to notify them of new candidates who fit their requirements.

Unemployed people and those seeking better jobs need to learn how to optimize their LinkedIn profile to align with this process of job search and recruiting.  According to Marci Reynolds, CEO of J2B Marketing, a “Job Seeker 2 Business,”™ there are many things a job seeker can do to optimize their profile to help ensure that they “show up in the appropriate search results, show up higher than other candidates (LinkedIn SEO), and stand out among the search results. Some of her tips are:

  • Your profile should be 100% “complete,” per LinkedIn standards
  • Include a detailed work history, with clear job titles and well written job descriptions that describe both your responsibilities and your key accomplishments
  • Make sure your “industry” selection is tied to the job you want, not the job you had.
  • Make sure you have some recommendations from your connections
  • Use a professional, flattering profile photo that looks like you already have the role you’re seeking
  • Use a headline to effectively market your skills and abilities. Your LinkedIn headline is like your personal tagline

Klout: If you’re new to Twitter and haven’t heard of Klout, you will soon. Klout is the gold standard for measuring your influence on Twitter.  Klout uses several measurements to come up with a Klout Score for each and every Twitter user.

The Klout Score measures influence based on your ability to drive action. Every time you create content or engage you influence others. The Klout Score uses data from social networks in order to measure:

  • True Reach: the number of people you influence. When you post a message, these people tend to respond or share it.
  • Amplification: how much you influence people. When you post a message, how many people respond to it or spread it further? If people often act upon your content you have a high Amplification score.
  • Network Impact: the influence of the people in your True Reach. How often do top Influencers share and respond to your content? When they do so, they are increasing your Network score.

Klout assigns a number between 0 and 100 to represent how influential you are on Twitter.  This number may seem arbitrary, but it’s important for several reasons.

Firstly, Klout is a much better measurement of how “well” you’re doing on Twitter than your follower count. Not all followers may really be interested in what you have to say, so using this to measure your Twitter success is not a great strategy.  Klout uses a robust suite of different measurements – which includes engaged follower count – to come to one single Klout Score.

Secondly, Klout is important because it’s the standard measurement for influence in social media, and knowing your Klout score shows that you know a thing or two about tweeting.

Thirdly, focusing on increasing your Klout score will make you a better tweeter.  Klout emphasizes things like getting retweets and using @mentions to engage with your community. So if you change your Twitter strategy to try and increase your score, you will likely end up tweeting more frequently, replying to more users, and sharing more retweetable tweets.

There are several other contenders for influence measurement on Twitter, but Klout is the most talked-about, well-known influence measure out there, so it’s a good idea to familiarize yourself with it so you can join in the conversation.

Reshoring: Reshoring simply means returning manufacturing to America from offshore.

To help accelerate this trend, there is a new initiative with a plan to efficiently reduce our imports, increase our “net exports” and regain manufacturing jobs in a non-protectionist manner.  The Reshoring Initiative was founded by Harry Moser, retired president of GF Agie Charmilles LLC, a leading machine tool supplier in Lincolnshire, Illinois.  The Initiative shows how outsourcing within the United States can reduce a company’s Total Cost of Ownership (TCO) of purchased parts and tooling and offer a host of other benefits while bringing U.S. manufacturing jobs home.

Harry Moser said, “Reshoring breaks out of the waiting-for-policy-decisions problem, the economic zero-sum-game and the increases in consumer prices and assures that the pie grows to the advantage of all Americans.  Reshoring also focuses on the manufacturing sector that has suffered so many job losses for decades and the Small-to-Medium Enterprises (SMEs) that offer the best potential for job growth.”

The Initiative documents the benefits of sourcing in the United States for large manufacturers and helps suppliers convince their U.S. customers to source local.  Archstone Consulting’s 2009 survey showed that 60% of manufacturers use “rudimentary total cost models” and ignore 20% of the cost of offshoring.   If a manufacturer is not accounting for 20% of their costs to offshore, offshoring may not be the most economical decision.  In tough economic times and stiff global competition, no company can afford this.  To help companies make better sourcing decisions the Reshoring Initiative provides:

  • A free Total Cost of Ownership (TCO) software that helps manufacturers calculate the real offshoring impact on their P&L
  • Publicity to drive the reshoring trend
  • Access to NTMA/PMA Contract Manufacturing Purchasing Fairs to help manufacturers find competitive U.S. sources.

Manufacturing companies can reshore to:

  • Reduce pipeline and surge inventory impacts on Just-in-time operations
  • Improve the quality and consistency of products
  • Cluster manufacturing near R&D facilities, enhancing innovation
  • Reduce Intellectual Property and regulatory compliance risk
  • Reduce Total Cost of Ownership (TCO)

The Initiative has received increasing visibility and influence: recognition by Industry Week magazine through inducting Harry Moser into its 2010 Manufacturing Hall of Fame, inclusion of the TCO concept in Cong. Wolf’s (R VA) “Bring Jobs Back to America Act” (H.R.516); numerous webinars; dozens of industry articles; presentations in major industry and government policy conferences in Chicago and Washington, DC; and coverage by CBS, CNBC, WSJ, USA Today and the Lean Nation radio show.

The Initiative is succeeding in changing OEMs’ behavior. Companies have committed to reshore after reading Initiative articles.  Fifty-seven representatives from large manufacturers and 113 custom U.S. manufacturers attended the May 12, 2011 NTMA/PMA Contract Manufacturing Purchasing Fair, where OEMs found competitive domestic suppliers to manufacture parts and tooling.  Sixty-four percent of the OEMs brought back to the U. S. at least some work that was currently offshored.

Of all the trends mentioned above, the Reshoring Initiative has the potential to provide the most benefit for America as a whole by reducing our trade deficit and providing increased job opportunities jobs for the millions of unemployed.   Let’s embrace these present trends to create a better future!

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What Led to the Problem of Chinese Counterfeit Parts?

Tuesday, November 15th, 2011

Last week, the Senate Armed Services Committee reported that an investigation found and examined about 1800 cases of suspected counterfeit electronic parts dating from 2009 to last year, totaling about a million individual components.  Tracing the supply chain, 70% of the components came through China, where a variety of methods were used to misrepresent the parts as new and genuine.  Hearings now being conducted by Senator Carl Levin (D-Michigan) and Senator John McCain (R-Arizona).

At a news conference on Monday, November 7, 2011, Sen. Carl Levin told reporters, “There’s a flood of counterfeit parts entering the defense supply chain.  It is endangering our troops and it is costing us a fortune.”

Sen. John McCain said the investigation documents the alarming “threat counterfeit parts pose to the safety of our men and women in uniform, to national security and to our economy.”  He added, “We can’t tolerate the risk of a ballistic missile interceptor failing to hit its target, a helicopter pilot unable to fire his missiles, or any other mission failure because of a counterfeit part.”

This dangerous state of affairs has taken over 20 years to develop and is a complex web of unintended consequences of seemingly innocuous changes in policies.  There are four main reasons for the problem of Chinese counterfeit components:

1.      Mil. Spec. qualified components replaced by off the shelf components

2.      “Buy American” requirements relaxed

3.      Manufacturing outsourced offshore, mainly in China

4.      Rapid obsolescence of components, especially micro chips

It all started with the scandals of the 1980s over the $600 toilet seats and $400 wrenches that President Reagan’s Defense Department, under Caspar Weinberger, was accused of wasting its money on by the Democrat-controlled Congress.

At the time, the news media ignored reasonable voices pointing out that tooling often has to be made to produce metal, plastic, rubber, and fiber glass parts in certain manufacturing processes.  This tooling cost then has to be amortized into the piece price of the part; i.e., tooling cost divided by the number of parts ordered plus piece price equals selling price. Since defense and military parts are produced in much lower volume than commercial products, the amortized tooling costs add much more to the part cost than it does for commercial parts.

The $600 toilet seat was actually a uniquely shaped, molded fiberglass shroud that fits over the toilet and had to satisfy specifications for vibration resistance, weight, and durability for the P-3C Orion antisubmarine aircraft, which went into service in 1962.  Since the airplane had been out of production for years, new tooling was required to produce the part.  The price reflected the design work and the cost of the equipment to manufacture them, and Lockheed Corp. charged $34,560 for 54 toilet covers, or $640 each.  The president of Lockheed at the time, Lawrence Kitchen, adjusted to the price to $100 each and returned $29,165.

Because of the public outcry over these scandals, the procurement regulations were changed.  The Defense Department, branches of the military, and their supply chain of vendors were allowed to purchase commercial off the shelf parts (COTS) if they met the same fit and function of parts made to strict military specifications.  In the early 1990s, most commercial parts were still being made in the United States, with some outsourcing to the Philippines, Hong Kong, and Singapore, so this change was pretty safe.  Permitting commercial parts to replace Mil. Spec. parts probably drove out of business the small companies that catered exclusively to the military and that provided traceability, per Mil. Spec., for parts supplied to government agencies, military contractors, and subcontractors.  This was all done in the name of cost savings.  Now, however, most commercial electronic components and micro chips are fabricated in China.

Second, after the end of the Cold War and the successful conclusion of the first Gulf War, the provisions of the “Buy American Act” were eased to allow purchasing off the shelf commercial parts from foreign countries by the Defense Department and other government agencies.  Previously, parts, assemblies, and systems were required to be substantially made in the United States or in a NATO country, such as Great Britain, France, and Germany.

This led to parts being made in China as more and more American companies started to outsource manufacturing in China either by selecting Chinese companies as vendors or setting up their own manufacturing plants in China.   This trend accelerated after China received “most favored nation” status with the approval of the World Trade Organization treaty in the year 2000, and American companies started to build semiconductor wafer fab plants in China to produce micro chips.

The problem with counterfeit parts is not something new to industry – there were always a small number of rejected parts that went out the “back door” of companies to be sold on the black or “gray” markets by individual employees.  What is new is the purposeful production of counterfeit parts by a foreign government, namely, China, as a form of economic warfare and counter espionage.

Brian Toohey, president of the Semiconductor Industry Association (SIA), testified Tuesday before the Senate Armed Services Committee calling counterfeit parts “a ticking time bomb.”   He added, “The catastrophic failure risk inherently found in counterfeit semiconductors places our citizens and military personnel in unreasonable peril,” said Toohey. The SIA estimates that counterfeits cost US-based semiconductor companies more than $7.5 billion a year.

EBN Editor, Barbara Jorgensen wrote in her blog, “Counterfeits have been appearing in the consumer and industrial sectors for as long as anyone can remember, but their presence in mission-critical defense equipment and military and passenger aircraft threatens lives  The efforts have a ways to go, but the dialogue between industry associations such as the SIA and the Defense Department and Justice Department are a major step in the right direction.”

Bruce Rayner, Contributing Editor, EE Times, wrote “counterfeiting is on the rise and it is getting harder to detect.  Counterfeit computer hardware, including chips, was one of the top commodities seized in 2010 by the US Immigration and Customs Enforcement agency (ICE) … up five-fold over 2009…The reason for the increase is that there’s a lot of money to be made.  Many obsolete components are in demand by the military because they need to repair very old equipment, such as 1980s-vintage fighter jets.  But the parts are no longer manufactured, and only a few authorized distributors stock the vintage components.  In some cases, the only place to buy these chips is from independent distributors or brokers who don’t have formal sourcing relationships with the original component manufacturer. They buy them over the Internet from sources they don’t know and who can’t validate their authenticity.”

The August 2011 issue of Industry Week reported, “In 2010, government agents seized fake goods totaling $188.1 million, which if genuine would have been worth $1.4 billion.  Goods from China accounted for 66% of the value of seizures by U. S. Customs and Border Protection.”  In the same article, Wes Shepherd, CEO of Channel IQ, said that the outsourcing of manufacturing in China combined with online selling “introduced the specter of counterfeiting as a much more serious problem.”

Joe O’Neill, owner of O’Neill Technologies and formerly with Intel, Samsung and Toshiba, told me in an interview, “the counterfeit problem is a product life cycle mismatch between consumer and more traditional applications, such as industrial, medical, and defense.  The life cycle of micro chips, also referred to as micro processors and controllers, are very short in the networking, computer, and telecommunications industries.  The life cycle of a cell phone model may range from six to 12 months, while industrial and military products may have a life cycle of decades.  Products for the military are a small piece of the market so there is a real problem with part obsolescence.  Availability of these parts that have been made ‘end of life’ force manufacturers to go into the Gray Market or other non-traditional sources to keep their factories supplied with parts.  There are a few companies that specialize in making obsolescent microprocessors for industrial, medical or military manufacturers by “cloning” the parts.” One such company is Innovasic, which makes the X86 series of Intel and AMD micro processors.

During the Senate hearings, part of which I watched after work, photos of bins of electronic parts were shown as Thomas Sharpe, V. P. of SMT Corporation, described visiting electronic component marketplaces in July 2008, where scrapped electronic parts were washed in rivers or left for the daily monsoon rains, dried on river banks, and collected in bins to be ready for counterfeit processing.  Counterfeiters buy used parts for pennies in the street markets of Shenzhen and other Chinese cities, re-mark them, fix broken leads and buff them up, then ship them to brokers in the West who unknowingly or knowingly sell them to other brokers or to OEMs for multiples of what they paid.

Last year, the Department of Justice’s Task Force on Intellectual Property was created specifically to prosecute counterfeiters, and last week Stephanie McCloskey was sentenced to 38 months in federal prison for her role in a scheme by VisionTech Components to import fake chips from China into the U. S. that were sold to a variety of customers including defense contractors and the military.

Until we implement more stringent procurement regulations, strengthen “Buy American” procurement regulations for defense and military components, and return more manufacturing to the United States from offshore, it will be up to manufacturers to have a system to detect and deter counterfeits.  Many defense contractors have put in place strict regimen for inspecting, testing, and reporting counterfeits, but all companies need to be vigilant by inspecting, testing, and reporting.